Grant Management Associates — Funding Intelligence. Winning Strategy.

The landscape for affordable housing policy and funding in the United States is evolving rapidly as Congress and state leaders wrangle over budgets, program priorities, and new legislative reforms. The latest actions from Washington and Sacramento have significant implications for housing agencies, developers, nonprofits, and local governments. This article provides an in-depth look at what’s changing right now—and what it means for future funding opportunities.

1. Federal Housing Policy: Budgets, Priorities and Uncertainty

On July 24, 2025, the Senate Appropriations Committee approved a bipartisan bill to increase the Department of Housing and Urban Development’s (HUD) budget by $3.3 billion for FY 2026—a sharp contrast to the House’s draft budget, which trims HUD’s funding by $2.2 billion. At the same time, the Trump Administration is advocating for sweeping cuts: a 44% reduction in HUD’s budget, alongside the elimination of the longstanding Community Development Block Grant (CDBG) and HOME programs.

These competing visions underscore the precarious situation for housing and community development funding. The House and Senate bills must be reconciled before the new fiscal year begins on October 1, 2025. Many in the field are watching closely, as the final outcome could mean substantial expansion—or contraction—in federal funding streams for affordable housing, homelessness, and economic development.

2. Programmatic Reforms: LIHTC and Homeless Policy

Congress’s recently passed “One Big Beautiful Bill Act” has brought notable improvements to the Low Income Housing Tax Credit (LIHTC) program, effective in 2026:

A 12% increase to 9% credit allocation—enabling more affordable housing projects to secure crucial equity financing.
A reduction in the bond financing requirement for 4% credits from 50% to 25%—a transformative change that broadens eligibility for projects to access these credits.

Meanwhile, the Trump Administration’s recent executive order (July 24, 2025) marks a significant policy shift away from the “Housing First” approach. The order directs federal agencies to end support for low-barrier, rapid rehousing strategies and ties grant-funded assistance to mandatory participation in substance use treatment. This diverges from recent federal precedent and may disrupt established programs in the short term. It also injects uncertainty into the expected HUD Continuum of Care SuperNOFO for homelessness funding, which is due out in the coming weeks.

3. California State Policy: Budget Infusion and Regulatory Reform

California has stepped forward with a strong fiscal commitment to housing in its budget signed June 27, 2025:

$500 million for State Tax Credits to boost affordable housing development.
$120 million for the Multifamily Housing Program (MHP).
$300 million dedicated to downpayment assistance for first-time homebuyers.
$500 million for the Homeless Housing, Assistance, and Prevention Program (HHAP).

In addition to funding, the Governor has tied final budget approval to passage of two key bills—AB 130 and SB 131—that further streamline the development process for infill housing. These measures expand site size limits up to 20 acres, remove unit or affordable set-aside caps, and eliminate transit proximity requirements. Developers must pay prevailing wages on 100% affordable projects. Together, these reforms are expected to accelerate project delivery and improve access to state funding programs.

4. What’s Next: Opportunity and Caution

For housing stakeholders:

Federal Opportunities: Be ready for expanded federal dollars if the Senate budget prevails. Increased allocations to LIHTC present new opportunities for both nonprofit and for-profit developers. Monitor HUD funding negotiations and prepare to adapt to program eligibility changes—especially for homelessness and supportive housing grants.
California Opportunities: Applications for new state funds and tax credits will open soon. The relaxed CEQA review process can benefit larger infill projects—developers should revisit their portfolios and move swiftly to leverage new exemptions and streamlined approvals.
Risks: The Trump Administration’s opposition to “Housing First” may upend some federal grant programs and redirect funding priorities. Organizations focused on rapid rehousing and low-barrier strategies should anticipate changes to eligibility and prepare program alternatives.

Conclusion

The next several months are pivotal for the future of affordable housing and homelessness policy at the federal and state levels. Strategic preparation and close monitoring of policy updates will allow agencies, developers, and nonprofits to maximize new funding opportunities and navigate shifting program requirements.